How AMZN (Amazon.com) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a technology and e-commerce giant like Amazon (formerly Amazon.com, Inc.) makes money is essential for investors and anyone interested in the business of global online retail, cloud computing, and digital services. In this post, we break down Amazon's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Amazon Overview

Amazon operates a diversified business model spanning global e-commerce, cloud computing (AWS), third-party seller services, digital advertising, and various subscription and digital content offerings. Revenue comes primarily from its online stores, marketplace services for third-party sellers, Amazon Web Services (AWS), and a rapidly growing advertising business. The company’s business segments include North America, International, and AWS, each contributing to its broad revenue base.

Revenue Breakdown

• Total Revenue (Q3 2025): $180.2B (+13.4% YoY)
  • Online Stores Revenue: $67.4B (37.4% of total)
  • Third-Party (3P) Seller Services: $42.5B (23.6% of total)
  • AWS Revenue: $33.0B (18.3% of total)
  • Advertising Services Revenue: $17.7B (9.8% of total)
  • Other: $19.6B
• Growth is powered by AWS (+20.2% YoY) and Advertising (+23.5% YoY), reflecting Amazon’s expanding digital and cloud footprint.

Gross Profit and Margins

• Gross Profit: $91.5B (50.8% gross margin)
  • Cost of Revenue: $88.7B (+9.5% YoY)
  • Amazon maintains robust margins due to its scalable cloud business (AWS), high-margin advertising, and operational efficiencies in logistics and fulfillment.
• Most costs come from fulfillment, technology infrastructure, and content acquisition.

Operating Income and Expenses

• Operating Income: $17.4B (+0.1% YoY, 9.7% margin)
• Operating Expenses: $74.1B (+22.5% YoY)
  • R&D: $29.0B (+30.2% YoY, 16.1% of revenue) — Heavy investment in AI, cloud infrastructure, and logistics automation.
  • SG&A: $14.6B (+9.3% YoY, 8.1% of revenue) — Includes marketing, customer service, and general corporate costs.
  • Amazon continues to prioritize innovation and invest in growth while maintaining efficiency in its core operations.

Net Income

• Pre-Tax Income: $28.2B (+56.2% YoY, 15.6% margin)
• Income Tax: $6.91B (24.5% effective tax rate)
• Net Income: $21.2B (+38.2% YoY, 11.8% net margin)
• Amazon converts a significant portion of sales into profit due to the scalability of AWS and the high-margin nature of its advertising business.

What Drives Amazon's Money Machine?

• AWS (Amazon Web Services): 18.3% of revenue, but a much larger share of operating profit due to industry-leading margins.
• Third-Party Seller Services: Marketplace commissions and fulfillment fees drive 23.6% of revenue, leveraging Amazon’s logistics network.
• Advertising: Fastest-growing segment (+23.5% YoY), now nearly 10% of revenue, with high profitability.
• R&D Investment: $29.0B in Q3 2025, focused on AI, automation, and new digital services.
• Future Growth Areas: International expansion, healthcare, and generative AI, though not yet profitable at scale.

Visualizing Amazon's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially R&D) taking the largest chunk.
• Even after large investments in innovation and infrastructure, 11.8% of revenue drops to the bottom line.

Key Takeaways

• Amazon's money comes overwhelmingly from online stores, marketplace services, AWS, and advertising.
• High gross and net margins illustrate the power of Amazon’s scalable, diversified business model.
• Heavy investment in R&D, balanced by efficiency in operating costs, supports long-term innovation.
• Ongoing growth is driven by AWS, advertising, and international expansion.

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FAQ About Amazon's Income Statement

1. What is the main source of Amazon's revenue in 2025?

Amazon generates over 37% of its revenue from Online Stores, with significant contributions from third-party seller services 24%, AWS 18%, and advertising 10%. Other sources include digital content and subscription services.

2. How profitable is Amazon in Q3 2025?

Amazon reported net income of $21.2B in Q3 2025, with a net margin of approximately 11.8%, reflecting strong profitability driven by AWS, advertising, and operational scale.

3. What are the largest expense categories for Amazon?

The biggest expenses on Amazon’s income statement are operating expenses, particularly Research & Development (R&D) at $29.0B in Q3 2025, as Amazon prioritizes AI, logistics, and cloud innovation. SG&A is also significant at $14.6B.

4. Why does International operate at a loss?

International, despite generating substantial revenue, posted an operating loss in Q3 2025. This is because Amazon aggressively invests in global logistics, market entry, and local content, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does Amazon's effective tax rate compare to previous years?

Amazon’s effective tax rate in Q3 2025 was 24.5%, consistent with recent years. This moderate rate is primarily due to international structuring and tax benefits from share-based compensation.